The U.S. Court of Appeals for the
Sixth Circuit, Cincinnati, delivered a strong message that the federal
Telecommunications Act of 1996 protects local authority to manage, and receive
fair market compensation for, the use of the public’s rights-of-way by
telecommunications companies. In rendering its decision March 7, the court sided
with the City of Dearborn on the key issues in dispute, delivering the first
comprehensive appellate decision on provisions of the 1996 Act (Section 253)
that were designed to respect local right-of-way authorities.

Commenting on the decision, Dearborn
Mayor Michael Guido, a leader of the Conference’s efforts on
telecommunications matters, said, “We are pleased that the Court recognized
the public’s right to receive fair market compensation for rental of valuable
public rights-of-way, as Congress intended all along. It’s been an expensive
fight, but the case involved defending an important right. I hope that other
cities will also benefit from the decision.”

This case was particularly important
in that it originated shortly after enactment of the 1996 law and was the first
significant challenge in federal court to local right-of-way authorities.
Teleport Communications Group (TCG) of Detroit, now owned by AT&T, filed
suit in U.S. District Court, contesting the City of Dearborn’s
telecommunications ordinance that required companies to seek a franchise and to
compensate the City through a franchise fee of four percent of gross revenues
for use of its property. The appellate court affirmed the 1998 decision by the
U.S. District Court in TCG Detroit v. City of Dearborn.

The company had argued that the
City’s rules violated Section 253 of the 1996 Act, provisions which the
Conference of Mayors and other local government organizations vigorously sought
during Congressional action on this legislation. The intent of Section 253 was
to provide a “safe harbor” for local governments who acted in a
“non-discriminatory and competitively-neutral” manner when making local
property available to telecommunications companies operating in their
communities, including compensation for its use.

Among many positive results for
cities, the Sixth Circuit rejected as “sophistry” the company’s claim that
franchising was a barrier to entry, and it further agreed with the district
court that Congress used “compensation” in Section 253(c) to encompass more
than recovery of “costs.” Specifically, it found that the 1996 Act does not
pre-empt local governments’ ability to charge franchise fees to
telecommunications providers based on a percentage of the providers’ gross
receipts.

Both the district court and the
appellate court found the City’s four-percent fee to be “fair and
reasonable” within the meaning of Section 253 of the 1996 Act. Others
challenges to similar ordinances are pending in other courts, such as the U.S.
Court of Appeals for the Fourth Circuit, sitting in Richmond, where Bell
Atlantic v. Prince George’s County, Maryland, was argued on February 29th.